Foreign Perspectives

The second of these was the first that we were shown round by an estate agent. It’s the Hotel Maillol which was a four storey 13 bedroom place that was very much on our shortlist as it ticked pretty much all of the boxes on our requirements list. Not only that but it was going for EUR 300,000 which seemed incredibly good value in that it was pulling something like EUR 100,000 a year (very little of it declared though). Occupancy was good and growing and it was pretty much right in the heart of Perpignan yet positioned at the end of a short street so very quiet.

In fact, the price was so good that there were a number of people bidding on it and it didn’t sell for several months ie just over three years ago. Not too long after that, we noticed that there was some serious redevelopment work being undertaken on it which is still ongoing, much to our surprise. Well, after all it was in such a good location that an upgrade to a more luxurious place was an obvious thing to do and would probably have let them keep the occupancy figures up whilst taking the price from EUR 40-odd to around EUR 60 or so.

However, what they’ve actually done is to convert the place to a B&B as you can see. This means that they can’t run more than five rooms so the income will drop considerably.The 100k income was made up, roughly as follows: open 10 months ie 300 days x EUR 40 per room x 13 rooms x 60% occupancy = 93k. However, as a B&B the equation works out as 300 days x EUR 60 x 5 x 60% = 54k. Ordinarily, a B&B in France can pretty much double their income by doing evening meals but that’s only because most B&Bs are in the country and this one is surrounded by restaurants so they won’t be able to do that.

Actually, it’s a little worse than that as the Maillol had been running for quite a number of years and had built up the business considerably. The B&B version has changed the name, closed for three years (it’s not opened even now) and probably taken the room price up a fair bit. The combination of those factors mean that it’s almost certainly lost virtually all of the customers that the Maillol had so it will be reopening from a standing start and will need to build up to that 60% figure.

The final problem is that the occupancy was quite biased towards the summer with getting on for 100% occupancy of the 13 rooms for three or four months and, of course, since the B&B has only five rooms to play with the income over that period will be much lower.

So, why do people do it? Le Crocodile Rouge is far from unique in converting from a hotel to a B&B and we’re just singling them out because we’d looked at it ourselves.

Well, basically because they’re all aiming to create luxury B&Bs and charge a fortune for them. Snag is that there are limits to how much you can charge. Even quite luxurious chateaux only get away with EUR 100 or so and the luxury B&Bs can generally only charge EUR 70 at best. The biggest problem though is that five room limit because the holiday season in France is very much concentrated on around six weeks during July and August when you’d really need to be able to go to more than 100% occupancy but obviously you can’t do that.